As your organization strives to use its resources as effectively as possible, you might at some point consider outsourcing the functions that fall under your accounting and financial umbrella. But wait: You’ll first need to weigh the possible benefits and pitfalls.
Potential Advantages
Outsourcing your accounting allows you to access a higher level of expertise and greater resources than you could if you hired your own accountant. Outsourcing allows you to work with financial professionals of varying levels of experience and expertise tailored to the functions they will perform. These responsibilities could include:
• Processing payables, receivables, and cash transactions,
• Processing payables, receivables, and cash transactions,
• Reconciling accounts at month-end,
• Preparing financial statements, budgets, and forecasts,
• Assisting with tax and grant-reporting requirements, and
• Adequately communicating financial matters to your board.
But you don’t have to outsource all of these functions. Depending on your needs and budget, you can outsource only the ones that make sense for your organization. You also may benefit from occasionally using other firm experts — investment advisors, auditors, and valuation specialists, as necessary.
Many organizations turn to outsourcing accounting functions at times of significant personnel transition or workload increases. For example, what if your organization cannot afford the day-to-day expertise of a director of finance or CFO? Outsourcing certain financial oversight functions, such as review of account reconciliations and reporting financial results, can enhance your system of internal controls.
When outsourcing any accounting function, try to work with a senior level professional who will become familiar with your operations. This will help provide continuity of service as well as a resource to your senior management and board of directors.
Costs
With an outside firm, you pay only for the amount and level of services you require. With an on-staff accountant, that professional may spend some time doing work that someone at a lower pay level could handle equally well. Outsourcing will also spare your organization the expenses associated with a regular employee, such as payroll taxes and health insurance.
A benefit that many smaller organizations derive in working with an accounting services firm is reduced fees for audit and tax services. And most of the accounting questions that typically arise in an audit will have already been resolved
Other Considerations
Some organization’s leaders feel concerned about the lack of a CFO or business manager whose office they can walk into whenever a financial question arises. Meetings with the CPA firm will need to be planned and scheduled. Although, you can arrange for your outsourced accountant to be on-site on a regular basis. Communicate clearly with the CPA firm to understand availability expectations.
You also need to determine how financial data will flow. For example, will your organization send information to the accounting firm, or will firm personnel appear on-site to perform bookkeeping? Will your accounting software be available on a remote basis?
Finally, you must be prepared to spend some time on the transition. There will be a learning curve as the CPA firm familiarizes itself with your organization’s policies, procedures, and systems.
Your Responsibilities
Even with an outside firm handling your accounting functions, you will still be responsible for making financial decisions. Remember, although an external firm can assist and advise you on financial matters, those leading your organization have the last word.
Next Step
The Hantzmon Wiebel team can walk you through whether outsourced accounting makes the most sense for your organization. Contact a team member today to take the next step.
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Our firm provides the information in this article for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisors. Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this blog are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability and fitness for a particular purpose.
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